Market recovery: sense or sentiment?

12 apr. 2019

Dear investors,

Stock markets across all regions went up for the third consecutive month in a row. The MSCI All Countries index for instance shot up 2.96% in March, bringing its year-to-date gain to 14.2%. This effectively means that optimistic investors have now pushed prices above their previous high which was reached in 2018.

Does this mean that fears over an escalation of the US-China trade conflict, tightening monetary policy and slowdown in global economic activity have all receded?


Risk declined?


US-China trade conflict


Reopening of the dialogue, but politics – certainly with the current resident of the White House - remain uncertain.

Tightening monetary policy


Fed reacted to lower growth expectations and declining markets by becoming more patient, implementing a more dovish policy.

Slowdown global growth


Fed actually predicts a slowdown or they wouldn’t have changed their policy. Macro-economic data remains mixed.

In our previous newsletter we had already mentioned that the reopening of the dialogue led to a de-escalation of the conflict, which helped exporters compared to companies that serve the local market. While the declining stock prices may have ‘helped’ the administrations to stick to the ceasefire that was negotiated in December, the markets are now at new highs, making it more less clear how negotiations will evolve in the future.

The stock market weakness together with a slowing growth rate urged the Federal Reserve to become more patient in implementing their tightening monetary policy. However, central banks around the world continue to make decisions that extend and inflate a business cycle (expansion) that has gone on for over 10 years now. While the music may run a little longer because of this dovish policy, what goes up must come down eventually - certainly if the envisioned growth does not follow…

March was a pretty bad month for our funds, that lagged the markets significantly. With technology stocks up 20%, growth seems to be in vogue again. Navigator has more of a value tilt and is underinvested in mega caps, which makes it hard to outperform when a significant part of the market gains is driven by a few fast-growing giants. In Flexible, we increased the hedge last month, but have not been rewarded for this decision as markets remained bullish.

Best regards,

Werner, Thierry and Nils